Business Loans

What is Business Loans?

A business loan is a loan specifically intended for business purposes. As with all loans, it involves the creation of a debt, which will be repaid with added interest. There are a number of different types of business loans, including bank loans, mezzanine financing, asset-based financing, invoice financing, microloans, business cash advances and cash flow loans.

Different types of business loans

• Term loan: Terms loan can range between 5 to 20 years and can have fixed or variable interest rates. Such credit will appear in your books of accounts as debt and you will need to show why you want the loan, your financial projections and your repayment capability.

• Equipment financing: These types of loans are predominantly for the manufacturing businesses. Equipments can be costly, but can be crucial for the operation and expansion of a business. To purchase equipments, most banks have specialized loan products to meet this need and tends to be at the upper limit of Rs 25 crore.

• Pradhan Mantri Mudra Yojana (PMMY): Pradhan Mantri MUDRA Yojana (PMMY) is a scheme specifically for the MSME industry in the non-farm sector. These loans are given by Commercial Banks, RRBs, Small Finance Banks, Cooperative Banks, MFIs and NBFCs. The loans under this scheme is available under three products – Shishu, Kishore and Tarun to signify the stage of growth / development and funding needs of the enterprise.

• Stand Up India: This scheme is targeted at entrepreneurs from the Scheduled Caste (SC) or Scheduled Tribe (ST) and Woman borrower to set up a venture (not meant for enterprises which has already started operations). In case of non-individual enterprises at least 51% of the shareholding and controlling stake should be held by either an SC/ST or Woman entrepreneur.